Budgeting intentions

Suresh Prabhu cannot be found fault with for his noble intentions to modernise the Indian Railways. He has announced a number of new amenities to make rail journey comfortable. After a huge passenger fare hike last year, he had no reason to effect another hike in passenger fares. Still, passengers are happy for his gesture. Prime Minister is in fact right in describing the budget as futuristic. The intentions will be a reality, if the management plan is grounded effectively. But, the road ahead is risky and murky.

The Railway Budget 2015-16 plans Rs 8.5 lakh crore investments in five years. It does not propose any massive infusion of gross budgetary support for this key initiative. Railway Minister intends to depend mainly on long-term debt to finance his massive plans. But, this debt would further cripple the precarious rail finances, if the sector does not turn revenue surplus. The budget is short in detail on a fiscal plan to turn the railways into a surplus sector. The other route would be public private partnership and FDI. But, the 12th Plan document officially acknowledged the fact that the investment through PPP route is not actually forthcoming. The FDI would obviously flow into high revenue areas rather than financing the transport needs of common man. The operating ratio (OR) of the Railways declined to an unsustainable level of over 90 per cent in 2010-11 from around 80 per cent in the 1950s. Globally, 75 to 80 per cent or lower is seen as healthy benchmark. India ranks among the worst rail networks in the world on this count. Suresh Prabhu in this budget also proposed an OR of 88.5 per cent as against the prevailing ratio of 91.8 per cent for 2014-15. This means only eight paise is saved for every one rupee earned. With a low gross budgetary support and unsustainable OR, how can the railways mobilise the resources to implement the promises? Railways need six lakh crore funding in next three to four years. Prabhu’s dreams would be a reality for you and me only if private investment flows in.

Given this precarious financial situation, expansion of facilities is bound to have cost for the people. For instance, railway budget has increased the freight tariff by 10 per cent for various commodities. As a result, prices of food grains, pulses, cement, coal, urea and steel are likely to increase. This would also make rail freight less competitive as compared to road transport.

The Railway Minister needs to make a serious effort to overcome the financial crisis gripping the Indian Railways. Over 50 per cent of proposed 600 projects are yet to be completed leading to cost overruns. The project management capability of the system has to be substantially augmented. A paradigm shift is called for to make the budget of intentions a reality.